Photo-Illustration: Intelligencer; Photos: Getty

“I had no idea who Barry Silbert was or anything until after November 16, 2022,” Eric Asquith told me. That date was when he was pretty sure he had lost his family’s savings of $1,052,000.

Asquith took what he thought was the sober route into crypto. He didn’t buy bitcoin or other meme tokens. Instead, earlier that year, he moved over cash from his business — just a little at first, then more — and converted it into digital currencies he thought were as good as cash. The digital coins were called GUSD, and each was worth exactly $1 because the company that minted them — Tyler and Cameron Winklevoss’s crypto exchange, Gemini — backed each one with real money and assets. Gemini seemed different from the rest of the market with big ads that said “Crypto Without Chaos” and “The Revolution Needs Rules.” Asquith was so cautious that he didn’t even trade — he just put his million bucks into a kind of savings account called Earn, which paid him about 5.5 percent a year — far higher than what major banks were offering at the time. He wasn’t alone. Among the hundreds of thousands of other Earn customers were a grandmother who invested her entire life savings and a man saving his money for a long-needed surgery.

But crypto is built on disguises. Wallets are identified by long strings of code instead of users’ names; companies emerge and disappear without a trace. What Asquith did not fully understand was that his money was no longer with Gemini. In one sense, Genesis, a crypto company owned by Barry Silbert had it, but even that wasn’t quite true. Soon-to-collapse hedge funds with names like Three Arrows Capital and Alameda Research — Sam Bankman-Fried’s personal fund — were quietly borrowing from Silbert’s shop. Asquith’s money, and that of tens of thousands of others, was being used by SBF and others to make giant bets on some of the highest-flying, most volatile digital tokens. The Earn accounts were like the wide end of a funnel, passing money from some of crypto’s most cautious savers into the accounts of the market’s biggest risk-takers. Of course, everybody knows what happened next. Among many other industry casualties was Silbert’s Genesis, which declared bankruptcy on January 18, 2023.

In the aftermath of the collapse of Bankman-Fried’s massive crypto empire, Asquith was pretty sure his money was gone because of the shortsighted decisions of billionaires like the Winklevii and Silbert and SBF — a story as old as crypto itself. Multiple attempts at settlements, which would have paid Earn customers back most of their money, fell apart throughout 2023, with Silbert’s company, Digital Currency Group, and the creditors blaming one another. Then something changed. In November, Bankman-Fried was found guilty on seven counts of fraud and conspiracy. Crypto markets were finding their groove again. Soon, the price of bitcoin would more than double, hitting new all-time highs.

Bankruptcies are often difficult, complex legal affairs, typically returning pennies on the dollar to the creditors who are owed money. But in February, the victims, Silbert’s now-bankrupt crypto-lending operation, the Winklevoss twins, and regulators hammered out a deal to pay everybody back in full. The crypto bull market of 2024 made it possible to pay back Earn customers not some fraction of what they invested but the generally much higher sum of what their holdings would now be worth. For instance, a customer who had put one full bitcoin in the program would be paid back not just the $20,000 it was worth at the time Genesis declared bankruptcy; rather, they would receive a full bitcoin — worth more than three times that amount now. During a hearing when the new settlement proposal was announced, a Telegram chatroom of Earn victims overflowed with excitement. “Man I’m gunna be a home owner!!! Let’s finish this!!!!” said one of them. “I’m going to cry,” said another.

The sudden turn of events gave the case the potential to be a landmark in the world of crypto even as the bankruptcy proceedings of other companies, like FTX, paid their victims back less money and in U.S. dollars (rather than, say, bitcoin or other digital currencies).

Except there was Silbert. Earn victims who had been unfamiliar with him would soon learn that he had made his first fortune by studying the ins and outs of the bankruptcy system and using it to his financial advantage. Since February, the billionaire investor has been relying on a controversial interpretation of bankruptcy law to stop Asquith and all the other victims from getting the bigger payout, the one based on current prices. Instead, to simplify a bit, he would prefer to keep that money himself. “DCG cannot support a plan that not only deprives DCG of its corporate governance rights but also violates United States bankruptcy code,” a spokeswoman for the company said.

The victims have taken to calling it “the Barry Trade”: If Silbert is successful, he would be able to pocket as much as $1 billion in funds that would otherwise be returned to them. At the very least, Silbert may substantially delay the money being returned to Earn customers.

While Asquith has been hoping and fighting to get his money back, he has been confounded by the role Silbert played in all this. “There’s a lot of speculation that Barry Silbert put Genesis into bankruptcy on purpose, given his expertise in bankruptcy and knowledge of the process and what he can obtain as a result,” he said. Was he the puppet master working the flow of money into the companies he controlled? Or, as he has argued in court, was he a well-intentioned executive duped by the industry’s real frauds, who are now either in jail or in hiding?

Silbert grew up in Gaithersburg, Maryland, about 20 miles outside Washington, D.C. When he was about 10, his father died of an aneurysm that stopped his heart, a tragedy that prompted him to find a job to help support his family, his mother once told Bloomberg. After getting certified as a trader and a stockbroker while still in high school, he’d go on to work at two of the well-known houses on Wall Street, Bear Stearns and Smith Barney.

It was after graduating from business school that he became deeply acquainted with the bankruptcy system — and the potential it offered for giant profits. While working for a smaller investment bank, Houlihan Lokey, he was selling off the fiber-optic cables and pipelines of bankrupt companies like Enron and WoldCom, two of the biggest accounting frauds of the 1990s and early 2000s. It was this job, he would later tell Congress, that led to his own company: SecondMarket. When companies go bankrupt, their assets are at the mercy of competing stakeholders — usually anyone who lent the company money and is demanding it back. These assets can be far riskier than a typical stock or bond, in part because the bankruptcy process can take years. Silbert’s new company would be, in his estimation, like eBay for bankruptcy claims and other hard-to-sell stock — not quite the New York Stock Exchange, but a lot easier the existing alternatives.

The early years were ramshackle, just a few traders in a 400-square-foot office in downtown Manhattan with overlapping roles and a sense of ownership in the business, said Adam Oliveri, one of Silbert’s earliest hires, who came straight out of an undergraduate economics program. “I was very passionate about what we’re doing as a young guy,” he said. “When I felt we weren’t doing something the way that it ought to be done, I would — and in hindsight, it wasn’t the right thing to do as a member of a team — but I would go right to Barry and stand on top of the desk and speak my speech about why we could do better.” After a few years, Silbert found an extremely profitable niche: selling Facebook shares before the company went public. Mark Zuckerberg’s employees were looking to sell off shares that they knew were worth lots of money, and Silbert & Co. all but cornered the market. The business was notable, and profitable, enough to land him on the cover of Bloomberg Markets magazine.

In 2015, Silbert sold SecondMarket to NASDAQ, but by then he had moved on to something new: bitcoin. In 2012, he was already buying up bitcoins for a trust that investors could pour money into. There were high-stakes meetings with early bitcoin evangelist Charlie Shrem to fund BitInstant, an early digital currency market — but he lost out on that deal to the Winklevoss twins; meanwhile, Shrem ended up spending a few years in prison for his role in a money-laundering scheme. Silbert even called up Jamie Dimon to convince him that bitcoin was the future of money (he wasn’t successful), according to Digital Gold, reporter Nathanial Popper’s account of the crypto industry’s early years. “What Barry did back then was really legitimize bitcoin as an investment and asset class to a lot of VCs,” Shrem said on a podcast in March.

Silbert’s bitcoin fund, which would soon be called the Grayscale Bitcoin Trust, was a hit. At the time, there was nothing like it — it traded with a stock ticker on public markets and was one of the few ways for investors not interested in signing up on a crypto exchange to own bitcoin. For that reason, financial journalist Felix Salmon would call it “not a good idea.” It was, however, extremely profitable, since DCG at the time charged 2 percent to buy a share of the fund and 1.5 percent to sell. And it was massive. By the end of 2019, it had $1.87 billion worth of bitcoin; the next year, it had grown nearly tenfold to $17.7 billion. Pretty soon, it would double again.

Silbert was rolling in money, and it seemed to go everywhere in crypto land. Through DCG, he invested in one of the world’s largest exchanges, Coinbase, hardware-wallet maker Ledger, and multibillion-dollar shitcoin Ripple; he also bought the news outlet CoinDesk and started Genesis as an institutional lending operation, modeled after Wall Street. Genesis acted like a hedge fund, borrowing money (if indirectly) from people like Asquith, then trading aggressively — and was, one person said, one of DCG’s primary moneymakers during the boom years.

Despite being arguably one of the most influential people in crypto, Silbert himself would not break through as the face of the industry — not in the way that Bankman-Fried, with his wild hair and celebrity pals, began to do in 2020. The web of companies would remain better known than the executive who was backing them. Then, in 2021, Genesis partnered with the Winklevoss twins’ exchange to start the Earn accounts, a deal that would send about $1 billion in lent crypto to Silbert’s company.

It was this segment of DCG’s business that — despite its explosive growth during the pandemic-era crypto bubble — became the biggest threat to Silbert’s quiet dominance of the industry.

Since last January, much of the action around Silbert’s companies has played out in the legal realm. Creditors like Asquith have been agitating to get as much of their money back as possible in a New York bankruptcy court. On October 19, New York Attorney General Letitia James also filed suit, accusing DCG, Genesis, and Silbert — as well as Gemini, the Winklevosses’ exchange, and Genesis’s CEO — of running a scheme to defraud customers. Among the allegations was that DCG issued a false $1.1 billion promissory note to paper over a hole in its balance sheet after Three Arrows Capital — a Genesis client — collapsed in the spring of 2022. The suit detailed a two-sided plan: The Winklevoss brothers’ Gemini had allegedly tricked investors into putting their money into a program that wasn’t as safe as it looked, while Silbert’s DCG and its subsidiaries allegedly gambled with the money. “Whatever Gemini may or may not have done pales in comparison to what you see at Genesis, which was more than negligent when it came to protecting customer assets and complying with general best practices,” one former employee said. Among those problems, the person said, was not screening clients who were on, say, the Treasury’s blacklists — an allegation that was supported by a separate January suit filed by New York Department of Financial Services.

The suits from the AG and regulators are ongoing, and DCG and Silbert have claimed they’ve done nothing wrong. (DCG also claims that its promissory note was not fraudulent and it intends to honor it). Both are trying to remove themselves as defendants. Whatever the odds are in the state cases, Silbert has been pursuing his most overtly aggressive case against the Earn customers — the ones who’d loaned him the money in the first place. Since February, he has been making an argument that might seem, on the face of it, bizarre. The bankruptcy code, DCG is arguing, entitles many victims to a fraction of the current value of the crypto they had lent Genesis — again, for bitcoin and many other tokens, an appreciation of hundreds or even thousands of percent is at stake.

Silbert’s legal logic is that the bankruptcy code sets a date to value victims’ claims in U.S. dollars, and in Genesis’ case, it just happened to be around the market’s lows. “Your honor, I can assure you that if bitcoin was worth $10,000 today, you’d be having different arguments” from the victims, Jeffrey D. Saferstein, a lawyer representing DCG, said during a February hearing. Last month, during a hearing when a $1.1 billion settlement was announced, a lawyer for DCG went even further and argued that the judge didn’t have the authority to approve the deal. This has incensed the victims. “I’ve been in the crypto space for a long time, and I’ve always idolized Barry,” one of the creditors, who asked to be anonymous, told me. “After all this? I cannot stand him.”

On March 18, Judge Sean H. Lane heard final arguments for the case in his courtroom in White Plains, and one lawyer after another representing creditors, Genesis, and Gemini made their cases for why Silbert’s argument should be rejected. There were plenty of technical points, but the core of it was that a bitcoin was something special — like a rare baseball card. “A hypothetical creditor entitled to one Honus Wagner card would still be entitled to a full card, not one ripped in half,” Brian Rosen, an attorney for Genesis, said during the hearing. (In a weird legal twist, Genesis is arguing against Silbert and DCG and is supporting the victims.) But Jessica Liou, one of the attorneys representing DCG, called the victims’ arguments a “Frankenstein doctrine” that had no support from the rules that the bankruptcy courts were supposed to follow. “I know that this is not an easy decision for the court to make, in the sense that there is a concern about the impact to creditors here in the Genesis case. However, sometimes the court is called upon to make very difficult decisions,” she said. Other lawyers for DCG have said that, if the judge rules for the victims, that decision could be “reversible” on appeal, a process that could further delay payment for months.

There are still snares that could keep Silbert on the hook for the money, even if the judge sides with him. If he and DCG don’t succeed in getting themselves removed from the AG’s suit, the state could seize the money as restitution — a workaround that DCG and Silbert are also trying to head off. If he succeeds, though, he could block the AG’s office from collecting the money on behalf of the Earn customers and ultimately keep it in his coffers.

A ruling isn’t expected until April. Since the settlement announcement, the victims have resigned themselves to an even longer wait as Silbert continues to fight. “A year ago, there was a deal that was proposed. Everyone was celebrating in a very similar way,” Asquith said. “Now, I’ll believe it when it’s in my account.”